Why the recurrent aspect of 2014 budget is high, Okonjo-Iweala explains
Finance Minister Dr Ngozi Okonjo-Iweala has explained why the recurrent aspect of the 2014 budget is high.Tax, Federal Government, Okonjo-Iweala, Nigeria economy
The minister noted that “under the proposed 2014 budget, the recurrent expenditure will rise to 74 per cent, for two reasons: (i) A decline in the Budget base: Total expenditure of N4.64 trillion in the proposed 2014 is about a 7 per cent decline from the 2013 budget level of N4.98 trillion. From a mathematical standpoint, this reduction in the budget base will result in a slight increase in the weight of the recurrent expenditure in the budget, which in absolute terms, has increased from 2013 levels.”
(ii) Payment of Pensions: She stated that the country is yet to fully absorb pension’s implications of the 2010 wage increases. “Starting in 2013 budge, this Administration commenced tackling the payment of outstanding military pensions and Budget 2014 will further address civilian pensions,” Mrs Okonjo-Iweala said.
A statement from her office said the government had been under pressure from many quarters, including senators, to integrate the civilian component of pension, and doing so will further increase the recurrent budget.
She accused some senators, who raised doubts over the recurrent aspect of the 2014 budget, of personalising the budget, noting that “in 2010, the government awarded salary increases of 53 per cent across the board to the public service, which increased the wage bill from N856.9 billion in 2009 to N1.36 trillion in 2010”.
At the time, she said the nation’s “finances were inadequate to back this award, and the government had to increase domestic borrowing significantly to cover the shortfall.”
This rise in government domestic borrowing from N524 billion in 2009 to N1.36 trillion in 2010, she added, “is also the singular cause of the country’s rising domestic debt profile, from 14.83 per cent of our Gross Domestic Product (GDP) in 2009 to 17.98 per cent of GDP in 2010. The rise in salaries is also reflected by the sharp increase in the recurrent expenditure to 74.4 per cent in 2011,” she said.
Dr. Ngozi Okonjo-Iweala said she was not in government when these events took place but noted that President Goodluck Jonathan has focused on reversing this trend. According to her, “since 2011, various measures have been introduced, leading to a steady decline in recurrent expenditure from 74.4 per cent in 2011, to 71.47 per cent in 2012, and then to 67.5 per cent in 2013”.
On the issue of excessive borrowing, the minister said that the flow of domestic borrowing has actually reduced, from N852 billion in 2011 to N588 billion in 2013, and a borrowing of N572 billion proposed in the 2014 budget.
For the first time in the history of our domestic debt, the Finance Minister said, “N75 billion of our domestic bonds” has been redeemed. There is, besides, a sinking fund of N25 billion per annum to support the retirement of maturing bonds as above, rather than roll them over. This is directly contrary to the allegation that she is responsible for excessive borrowing within the economy.”
To lower the cost of debt service, the Debt Management Office (DMO) has switched it’s debt strategy to external borrowing (from multilateral finance organisations like the African Development Bank, China EXIM Bank, and the World Bank) at zero or very concessionary interest rates, Mrs Okonjo-Iweala said.
She lamented that “a large number of lies are being told against the budget by those who do not care about the impact of their falsehood on the economy and the image of the country”.
She acknowledged that the budget has some imperfections “which we are working hard to fix” the large number of positives in terms of policies and resources were identified to include:
*In addition to the N18.5 billion budgeted for the housing sector, Budget 2014 will leverage over N100 billion for a new mortgage refinance company that will create millions of jobs and provide affordable homes for millions of Nigerians;
•The budget will leverage considerable resources from internal and external sources to support the agricultural sector; and
•The budget will support the ongoing massive repairs and reinvigoration of infrastructure in roads, rail, power and aviation.